Polls are conducted annually by life insurance experts to evaluate public perceptions of life insurance. Each year, the results are similar – between 85 and 90 percent of people surveyed think owning life insurance is important. Yet only 60 percent actually own some type of life insurance – 20 percent receive it as a job benefit; 40 percent bought a policy themselves.
This gap of 25 percent between adults who think owning life insurance is important versus those who actually own it translates into millions of Americans at risk for financial heartache.
A reason frequently given is that life insurance costs too much. However, when asked, people overestimated the costs of most life insurance policies by more than 100 percent.
Life insurance does not need to be expensive, particularly not at the Ukrainian National Association. Premium costs at the UNA are competitive and reasonable. As a fraternal benefit society, the UNA does not have the pressure to make profits for outside investors. Instead, UNA proceeds are used to fund fraternal and community projects.
Consumers are also uncertain about the benefits of different types of insurance. To understand the pros and cons, the best place to start is with the basics.
There are two broad categories of life insurance: permanent and term.
Permanent life insurance
Permanent insurance is the oldest form of life insurance. The key benefit is the fact that the insurance lasts through your lifetime – it is permanent. As long as all the premiums have been paid, the life insurance policy is active, from the payment of the first premium until the day of death.
Within permanent insurance choices, the classic choice is whole life, the choice offered by the UNA. Among the benefits are premiums that remain stable throughout your lifetime. You always know how much insurance you have; you always know how much you have to pay. The UNA also offers limited pay options whereby you can accelerate premium payments and have a paid-up policy by a certain age with no further premiums due.
Permanent whole life not only offers stable premiums, no risk and lifetime coverage, this policy offers another, very important benefit: cash value.
Cash value is the amount of money available to you “inside” your policy. As premium payments are made, a certain portion is designated as cash value – money that can be borrowed against the policy. Policyholders sometimes access cash value to help with a medical emergency or to complete a down payment on a house.
As with all life insurance, the beneficiary of a permanent policy receives the benefit tax-free.
Another characteristic of a permanent whole life policy with the UNA is that if a policyholder is unable to pay the premiums, rather than risk losing all life insurance, the premiums can be calculated towards an extended term policy or paid up policy with a reduced face amount.
These benefits of permanent whole life, however, come at a price. Permanent life insurance coverage is more expensive than the second category of insurance: term life.
Term insurance
Term life insurance provides protection only for a specific period – referred to as the “term” – usually between five and 20 years. This type of policy does not last a lifetime, does not usually accrue cash value and, when the term is over, will not provide a payout if the owner is alive. The benefit to this basic insurance is that it is affordable. While not all the benefits of a permanent policy are available for term insurance, for those who may not need all the benefits, a term policy is a solid choice. For a relatively small premium, you can purchase a lot of life insurance to cover a specified period.
Term insurance meets temporary needs for increased coverage. A typical example is a young couple in their 30s who marry, purchase a home and have a child within two years. Their responsibilities have increased dramatically. They are not interested in accumulating cash value, or thinking of final expenses. They just want life insurance coverage for five, 10, maybe 20 years.
Another candidate for term insurance is someone who started a business. People often take out a loan, use savings, or get a second mortgage to begin their business. In the event of unexpected death, a term policy will cover this extra debt.
At the UNA, until age 70, a term policy can be converted to a permanent policy for the same amount or less without having to provide evidence of insurability. This is a true benefit for those who have a large term policy and have concerns about future insurability. A 58-year-old with a $100,000 term policy ending soon could take advantage of this option to convert to a permanent policy without the concern of being denied.
To learn about the many cost-effective products offered by the UNA, please contact the UNA at the toll-free number 800-253-9862. Like the UNA through Facebook.com/UkrainianNationalAssociation, or visit online at www.ukrainiannationalassociation.org.